State insurance regulators are focusing their efforts on a short list of five consumer problems areas related to the improper sale of variable annuities and life insurance. The problem areas include: 1) 1035 exchanges, 2) variable annuities inside of qualified accounts, 401(k)s or IRAs, 3) failure to fully disclose costs and fees, 4) comparing sub-accounts to mutual funds, and 5) improper or unrealistic product illustrations.

While the actual extent of problems in these areas is not known, some industry observers believe that one or more regulations was violated in the sale of the majority of variable annuities and variable life insurance polices. The vast majority of sales practice violations are not reported to the regulators because the investor is not even aware that a violation has occurred. Financial damage, if visible at all, is often not apparent until many years later.

If you believe that you have been the victim of sales misconduct when buying a variable annuity or variable life insurance policy, then you basically have two options: report the incident to the regulators in your state or consult a private adviser. Both are long and tedious processes, but only the second option is likely to result in a financial recovery if you have suffered a loss from an improper sales practice. An apparent third option reporting the problem to personnel in your investment company is unlikely to result in any substantive corrective action because the automatic denial of wrongdoing mentality is deeply imbedded in the financial services industry. Investment representatives are routinely restricted from admitting wrongdoing or negotiating solutions with customers. These issues must be referred to the firms legal department where the individual is unlikely to make any progress without legal representation anyway. So this third option really is not really a separate strategy after all.

It might be smart to get an early opinion of an independent financial adviser and attorney in any case. Attorneys who handle these legal issues typically work in tandem with a financial adviser to identify, document and then redress problem areas. Some of these problem issues are addressed as class action claims, where others are handled on an individual case-by-case basis. It is usually necessary to demonstrate a realized financial loss or damage in order to successfully negotiate a financial settlement.